Tobacco
Settlement Agreement Fund Oversight Committee

Minutes

<MeetMDY1>October 3, 2007

The<MeetNo2>Tobacco Settlement Agreement Fund
Oversight Committee met on<Day>Wednesday,<MeetMDY2>October 3, 2007, at<MeetTime>10:00 AM, at the University of Louisville in the University Club building. Senator Carroll Gibson, Chair, called the meeting to order, and
the secretary called the roll.

Following roll call, the presiding chair, Senator Gibson,
informed the Committee on the health status of two members, Representative Mike
Denham, the House Co-chair, and Representative Royce Adams. Because of the lack
of a quorum, minutes of the September 2007 meeting were not approved.

Appearing before the Committee first was Mr. Keith Inman,
Vice President for University Advancement, University of Louisville. Mr. Inman updated
the Committee on some of the academic developments at the university and
thanked the General Assembly for its financial commitments to the institution.

After individual Committee members introduced themselves at
Co-chair Gibson’s suggestion, the legislative panel heard from two witnesses –
Robert T. Means, Jr., M.D., Interim Director of the Markey Cancer Center,
University of Kentucky, and Donald Miller, M.D., Ph.D, Director of the James
Graham Brown Cancer Center at the University of Louisville.

Addressing the Committee first, Dr. Means spoke specifically
about Markey Cancer Center’s work as a part of the Kentucky Lung Cancer
Research Program. Dr. Means focused on four main areas in his remarks: what was
being done in the area of early detection; current activities related to a
clinical trials network; the push to obtain National Cancer Institute
designation; and funding usage.

He described several partnerships with 5th
Congressional District hospitals in lung cancer screening and biomarker
research. Dr. Means described the clinical trials network, which involved
several hospitals throughout the state. As for the NCI designation, the
physician told the Committee that Markey had acquired over $12 million in NCI
yearly “direct” support, an increase of $2.1 million since the 2006 report.

Responding to Co-chair Gibson, Dr. Means indicated that the
National Cancer Institute did take into account the threshold of funding that Kentucky contributed to cancer research, specifically tobacco settlement funds and tobacco
tax revenues. He said they also looked at how the universities leverage the
funds to obtain additional moneys.

As discussion continued, Dr. Means responded to
Representative McKee about the success achieved because of the tobacco funds.
The time line for success in cancer research was relatively long, Dr. Means
said, perhaps lasting 10-20 years. He mentioned one drug that had been licensed
and was in clinical trials. Dr. Means also mentioned their ability to use the
funds to make credible applications for grants.

Next, the Committee heard from Dr. Miller, who first
discussed the Kentucky Lung Cancer Research Program. He told the Committee that
scientists he met at conferences were envious of the Kentucky program. Dr.
Miller said the program had “worked hand in glove” with the state’s “Bucks for
Brains” program.

Thanks to the funds, Dr. Miller said U of L went from having
no scientists doing work in lung cancer research in 2000 to a total of 30 at
present. Funding, he said, had risen from about $500,000 to $20 million.

Dr. Miller gave examples of how funds had been used,
including the development of a new drug that had cured a form of cancer, the
development of 27 new treatments and drugs, three of which were in clinical
trials, research work related to berries as a cancer preventative, and
non-embryonic stem cell research.

Dr. Miller said he believed the lung cancer research program
had had a significant impact in Kentucky, allowing the universities to work
together and extend their alliances and collaborations.

Responding to Representative McKee, Dr. Miller said 11
patients had been treated with the cancer curing drug, which was in clinical
trials. Representative McKee called their work “very impressive.”

Dr. Miller gave Representative Comer some examples of the
program’s public-private partnerships, including the collaboration with
Owensboro Medical Health System (OMHS) in a joint venture to develop cancer
therapies using plants, particularly tobacco. He later discussed the
partnership in greater detail.

Senator Boswell mentioned the collaboration in subsequent
remarks. He complimented U of L for stepping in and helping create the joint
venture. Senator Boswell said there were other plants in Kentucky that could be
used in drug research.

Dr. Miller turned to the U of L/OMHS joint venture.
According to his discussion, one of the first projects was the development of a
cervical cancer vaccine. Dr. Miller described the project to develop a much
cheaper cervical cancer vaccine, which could be beneficial to Third World
counties, in addition to the U.S.

He discussed how a protein for the drug would be grown in
tobacco plants.

Dr. Miller said they were just beginning to enter the Food
and Drug Administration approval process. The physician described a recent trip
to India in which residents of that country expressed excitement about the
potential drug.

Responding to Representative McKee, Dr. Miller said they
hoped to keep the costs of the drug down. On a second question, he said tobacco
farmers in Daviess County would produce the tobacco plants as a part of the
project. He said “several” farmers would be involved.

In response to Senator Boswell, Dr. Miller said the
intellectual property for the vaccine would be owned by U of L, and the
university would negotiate a license fee with a pharmaceutical company later.
The licensing would mean a revenue stream coming back to the university.

As an outgrowth of the Hart County Fair Association project,
publicly owned multipurpose facilities that support marketing opportunities and
events will be able to receive tobacco settlement funding in the future, a
change from previous policy, Mr. Rogers informed the Committee.

Following the review of projects, Mr. Rogers turned to the ADB’s
approval of changes to model programs to make them more flexible to producers
across the state impacted by the lingering drought. The changes affected
several model programs and were generally geared to assist livestock producers.
The board also adopted some recommendations to support education programs to
assist producers.

According to Mr. Rogers, GOAP staff would be researching the
legality of advancing county councils some of their 2008 tobacco settlement
funds, should they request them to assist in the drought relief effort. The ADB
was expected to take up the issue in its October meeting.

Responding to Representative McKee, Mr. Rogers said no
county had sought additional funds. He said counties collectively had about
$8.2 million in uncommitted funds. In contrast, 20-22 counties had less than
$5,000 in uncommitted moneys in their accounts, he said. In addition, Mr.
Rogers indicated that some counties were carrying balances of $200,000-plus.

In continuing discussion, Mr. Rogers said that, under the
Master Settlement Agreement statutes, the state board could provide state funds
to counties, but there was no mechanism to recoup those funds. According to Mr.
Rogers, county councils had certain responsibilities, but they were not legal
entities. Representative McKee said he believed a bill could be filed early in
the next session to correct that, if necessary.

Responding further to Representative McKee, Mr. Rogers said,
counting MSA funds expected next April, the ADB would have about $20 million
available. He said there were some additional funds existing to cover ADB
contracts that were not fully executed.

As discussion continued, Representative McKee encouraged Mr.
Rogers, the ADB, and the Department of Agriculture, to explore ways to assist
farmers. “This drought is very, very serious as we all know,” he said, indicating
there was not enough feed available for livestock. He mentioned his continued
support of Representative Comer’s idea of assisting farmers with
drought-related transportation.

Responding once again to Representative McKee, Mr. Rogers
said a working group consisting of his office staff, employees of the
Department of Agriculture, the University of Kentucky College of Agriculture,
and other agency representatives were meeting every Wednesday afternoon to
discuss drought strategies. He said they all were working together to make as
much information available as possible.

Mr. Rogers said further that they believed there was enough
feed in Kentucky, including rolled hay stalks, grain, and the like. He
mentioned producers taking advantage of distillers grain produced by a
Hopkinsville ethanol plant. Mr. Rogers said the plant was currently shipping
several tons a week outside of the U.S. With education and a push to move
producers to using commodities, he said, producers could make it through the
winter.

Representative McKee said it was important that the state
did everything it could to assist producers who wanted to keep their livestock.

Senator Boswell asked why the distillers grain was being
shipped out of Kentucky. Mr. Rogers responded that “it’s simply the
marketplace.” According to Mr. Rogers, experienced producers were taking
advantage of commodities such as distillers grain but others were not. He
reiterated that education would be vital to getting information disseminated to
producers.

Documents distributed during the Committee meeting are
available with meeting materials in the LRC Library. The meeting ended at
approximately noon.